In the fall of 2015, California Governor Jerry Brown signed into law Senate Bill 560 (Monning), a bill sponsored by the California Contractors State License Board (CSLB), that allows CSLB enforcement representatives (ERs) to issue a Notice to Appear in a California superior court enforcing a licensee’s obligation to secure valid and current workers’ compensation insurance in accordance with Section 3700.5 of the California Labor Code. Prior to enactment of SB 560, only California district attorney offices could issue citations to enforce this obligation. California law requires employers to have workers’ compensation insurance if they have even one employee, which includes a responsible managing employee (RME), and Section 7125 of the California Business & Professions Code requires all contractors with a C-39 Roofing classification to have a Certificate of Workers’ Compensation Insurance or a Certificate of Self-Insurance on file with the CSLB. California contractors and subcontractors should expect an uptick in the CSLB’s enforcement of California’s workers’ compensation insurance requirements.

Contractors should beware of stiff penalties for failure to comply with Section 3700.5:

(a) The failure to secure the payment of compensation as required by [Article 1 , commencing at Labor Code § 3700] by one who knew, or because of his or her knowledge or experience should be reasonably expected to have known, of the obligation to secure the payment of compensation, is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to double the amount of premium, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time compensation was not secured, but not less than [($10,000], or by both that imprisonment and fine.

(b) A second or subsequent conviction shall be punished by imprisonment in the county jail for a period not to exceed one year, by a fine of triple the amount of premium, or by both that imprisonment and fine, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time payment was not secured, but not less than [$50,000].

(c) Upon a first conviction of a person under [Section 3700.5], the person may be charged the costs of investigation at the discretion of the court. Upon a subsequent conviction, the person shall be charged the costs of investigation in addition to any other penalties pursuant to [Section 3700.5(b)]. The costs of investigation shall be paid only after the payment of any benefits that may be owed to injured workers, any reimbursement that may be owed to the director for benefits provided to the injured worker pursuant to Section 3717, and any other penalty assessments that may be owed.” (Emphases added).

Upon employing anyone in a manner that is subject to the workers’ compensation insurance laws of California, any exemption from workers’ compensation on file with the CSLB will no longer be valid and the licensee will be required to obtain and submit a Certificate of Workers’ Compensation Insurance or a Certificate of Self-Insurance. Proof of workers’ compensation insurance coverage must be received at the CSLB’s Headquarters within 90 days of the hire. Workers’ compensation insurance coverage must be continuous and failure to maintain it, as required by law, could result in significant consequences to the licensee.